CASE FILE Arbitration of Dispute concerning Computer Software Copyright

CASE FILE
Arbitration of Dispute concerning Computer
Software Copyright
Guangzhou Sea & Skytech Software Co., Ltd. v.
US Hongtu International Investment Inc.
(This case file is compiled by WANG Shu,
DONG Jinbo, LIU Ying, FENG Qin and XU Bing)
289
CONTENTS
1.Fact Summary
2.Application for Arbitration
3.Statement of Defense
4.Cooperation Agreement (Excerpt)
5.Industrial and Commercial Registration of Joint Venture
6.Business Operation License for Business Corporation
7.Arbitration Award No. 0029 (Excerpt)
8. Arbitration Award No. 0170 (Excerpt)
9.Application for Inquiry concerning Computer Software Copyright
10.Application for Inquiry concerning Computer Software Copyright
11.Prospectus (Excerpt)
12.Explanation of Prospectus by UK Accounting Firm
13.Definition of Management Information Systems (MIS)
14.Curricula for Vocational Colleges and Practice-Based Textbook Series
in New Century ---Management Information Systems (MIS)
15.Explanation of MIS by Guangzhou Sea & Skytech Software Co., Ltd.
16.Interview Transcript
17.Authorization Letter
18. Report on Forensic Identification of Computer Software (Pingjianzi
No. 22 of 2006) (Excerpt)
290
19.Report on Forensic Identificaiton of Computer Software (Pingjianzi
No. 25 of 2006) (Excerpt)
20. Deposition of Witness
291
FACT SUMMARY
In early 2000, Guangzhou Sea & Skytech Co., Ltd. (hereinafter referred
to as “Chinese Party”) and US Hongtu International Investment Inc.
(hereinafter referred to as “Foreign Party”) entered into a cooperation
agreement to establish a joint venture, namely, Guangzhou Donghua
Technology Co., Ltd (hereinafter referred to as “Joint Venture Company”).
Said agreement includes a “non-compete clause” and special agreement
that the title to the intellectual property listed in Appendix 3 shall be
transferred to the Joint Venture Company within one month after
execution of the Agreement.
Upon execution of the Cooperation Agreement, the Chinese Party
established Guangzhou Sea & Skytech Software Co., Ltd. (hereinafter
referred to as “Third Party Subsidiary”) with which the Chinese Party
continued to develop products relating to the computer software listed in
Appendix 3. The Foreign Party contended that the Chinese Party engaged
in parallel competition against the Joint Venture Company, which was in
breach of the “non-compete clause” in the Cooperation Agreement, so it
initiated arbitration with the China International Economic and Trade
Arbitration Commission (CIETAC) which made the Arbitration Award
No. 0029 against the Chinese Party for breach of agreement and ordered
292
the Chinese Party to return the profits from said breach of agreement to
the Joint Venture Company.
Thereafter, the Chinese Party also intiated arbitration proceedings on the
ground of failture to fulfill the goals of the joint venture, claiming that the
Cooperation Agreement be terminated and the Joint Venture Company be
dissolved. It was granted Arbitration Award No. 0170 which sustained
said claims. The Chinese Party registered the copyright of the computer
software (YUYU Software and WW Software) which was developed
prior to and in the course of the joint venture (hereinafter referred to as
“Software Copyright”) both in its own name and in the name of the Third
Party Subsidiary, and it had earned profits from business operations using
the Software Copyright but refused to execute Award 0029, so the joint
venture has not been liquidated yet.
For the aforesaid reasons, the Foreign Party initiated arbitration for the
third time, asking the arbitrators to find that the Chinese Party and its
Third Party Subsidiary have infringed the Software Copyright of the Joint
Venture Company and should be required to return the Software
Copyright in dispute; that the Chinese Party should compensate the Joint
Venture Company for losses equivant to the amount of the profts gained
from its breach of agreement and bear all costs that the Foreign Party has
293
incurred as a result of preventing such breach of agreement. (The Foreign
Party calculated the losses from breach of agreement on the basis of the
income disclosed in the Prospectus of Ginosoft. Ginosoft is a UK-based
holding company of Imfotech which is a Singapore-based holding
company of two subsidiary companies for business operations, namely,
Guangzhou Sea & Skytech Co., Ltd. and Guangzhou Sea & Skytech
Software Co., Ltd. In this case, the prospectus of Ginosoft is the only
evidence based on which the costs of breach of agreement are calculated,
and the amounts stated in the financial statements may be neglected.)
Note: Both YUYU and WW are softare eligible for export tax rebates.
The former had been successfully developed by the Chinese Party prior to
the execution of the Cooperation Agreement; while the latter was jointly
developed by the Chinese Party and its subsidiary in the course of the
joint venture. WW is an updated version of YUYU. The Foreign Party
claims that the intellectual property which the Chinese Party was to
transfer under the Cooperation Agreement is MIS listed in Appendix 3,
and YUYU and WW are included in MIS; while the Chinese Party claims
that MIS includes security software only, excluding any software eligible
for export tax rebates, so its development of the latter is not in breach of
the Agreement. It also claims that in the event that MIS includes software
eligible for export tax rebates, it includes YUYU only but not WW
294
because WW was jointly developed by the Chinese Party and the Third
Party Subsidiary after the establishment of the Joint Venture Company.
295
APPLICATION FOR ARBITRATION
CLAIMANT: US Hongtu International Investment Inc. (hereinafter
referred to as “Company B”)
Add.: 3 Happy Ave, Seattle, US
Legal Representative: MA Ketong
Tel.: 001-200-706-9444
RESPONDENT: Guangzhou Sea & Skytech Co., Ltd. (hereinafter
referred to as “Company A”)
Add.: 1 Baogang Ave, Haizhu District, Guangzhou, 510220, P.R. China
Legal Representative: WU Tianzhong
Tel.: 8620-34384321
Cause of Action: Breach of Cooperation Agreement
Award Requested:
The Tribunal should find that:
1. The Respondent breached the agreement by registering the Software
Copyright to which the Joint Venture Company should have had title
in its own name and in the name of its subsidiary;
2. The Software Copyright in dispute should be returned to the Joint
Venture Company;
3. The Respondent should surrender to the Joint Venture Company both
296
the Software Copyright which it has held in breach of the agreement
and all profits and interests thereof; and
4. The Chinese Party should bear the costs of the arbitration and the
reasonable costs which the Claimant has incurred for the purpose of
preventing breach of the agreement, totaling xxx Chinese RMB.
Facts and Legal Arguments:
The Claimant and the Respondent entered into the Sino-Foreign
Cooperation Agreement on January 31, 2000. By this agreement, both
parties agreed that for the purposes of establishing a Sino-foreign
cooperative joint venture, the Claimant would invest four million
(4,000,000.00) Chinese RMB, and the Respondent would invest all
human resources, assets and physical property. In addition, in accordance
with Appendix 3 of the Cooperation Agreement, the Chinese Party would
transfer its title to intellectual property held by it to the Joint Venture
Company as part of its investment.
However, after the Cooperation Agreement took effect, the Respondent
registered in its own name and in the name of its subsidiary (Guangzhou
Sea & Skytech Software Co., Ltd.) the Software Copyright which was to
be transferred to the Joint Venture Company, which constituted a breach
of the agreement and caused huge losses to both the Joint Venture
297
Company and the Claimant.
For the purposes of protecting the legitimate rights and interests of the
Claimant, we hereby submit this Application for Arbitration to the China
International Economic and Trade Arbitration Commission in accordance
with the arbitration clause in said agreement.
To the China International Economic and Trade Arbitration Commission
CLAIMANT: US Hongtu International Investment Inc.
(Signature and/or Stamp)
This tenth day of February two thousand
and six (2006)
Appendices:
1. Four duplicates of this Application for Arbitration
2. Five copies of Business License and Certificate of Legal
Representative
3. Five copies of Evidence
298
STATEMENT OF DEFENSE
RESPONDENT: Guangzhou Sea & Skytech Co., Ltd. (hereinafter
referred to as “Company A”)
Add.: 1 Baogang Ave, Haizhu District, Guangzhou, 510220, P.R. China
Legal Representative: WU Tianzhong
Tel.: 8620-34384321
CLAIMANT: US Hongtu International Investment Inc. (hereinafter
referred to as “Company B”)
Add.: 3 Happy Ave, Seattle, US
Legal Representative: MA Ketong
Tel.: 001-200-706-9444
The Respondent hereby comments on the Application for Arbitration
against the Respondent filed by US Hongtu International Investment Inc.
with the Commission concerning the dispute over the Software Copyright
as follows:
1. The claims by the Claimant are beyond the scope of arbitration. The
scope and content of arbitration shall be agreed upon between the two
parties, and the arbitration agreement only binds the two parties. In
accordance with the Cooperation Agreement entered into between the
299
Respondent and the Claimant, the Respondent has never entered into any
arbitration agreement with any party concerning the title to the Software
Copyright. Moreover, such title involves another right owner (Guangzhou
Sea & Skytech Software Co., Ltd.). Therefore, the claims by the claimant
are beyond the jurisdiction of arbitration, and the arbitration tribunal has
no jurisdiction over this dispute.
2. The Claimant is not entitled to request return of the Software
Copyright to the Joint Venture Company. Firstly, the Respondent and the
Foreign Party have reached an agreement that the intellectual property to
be transferred to the Joint Venture Company is MIS which includes
security software but not software eligible for export tax rebates.
Therefore, the Respondent did not breach the agreement by developing
software eligible for export tax rebates. Moreover, even in the event that
the arbitration tribunal finds YUYU software included in MIS eligible for
export tax rebates, WW software eligible for export tax rebates and listed
in the Claimant’s request was jointly developed by the Respondent and its
subsidiary independently of any other party and differs significantly from
YUYU software. That the Respondent registered such independently
developed software in its own name and in the name of its subsidiary is in
no breach of the agreement and is thus legal. Therefore, no ground can
support the claim for return of the Software Copyright to the Joint
300
Venture Company. In the meantime, in case the Respondent’s
development of software is in breach of the agreement, such software
should be deemed as intellectual property independently developed by the
Respondent. Such being the case, the Respondent is only liable for
reasonable compensation but not for returning the Software Copyright.
Lastly, in case the Software Copyright is to be surrendered, the Joint
Venture Company has been dissolved, so the Software Copyright should
not be returned to the Joint Venture Company but should belong to the
developer.
For the purposes of protecting the legitimate rights and interests of the
Respondent, we hereby request the China International Economic and
Trade Arbitration Commission to dismiss the claims of the Claimant.
To the China International Economic and Trade Arbitration Commission
RESPONDENT: Guangzhou Sea & Skytech
Co., Ltd.
(Signature and/or Stamp)
This twentieth day of February two thousand
and six (2006)
301
Appendices:
4. Four duplicates of this Statement of Defense
5. Five copies of Business License and Certificate of Legal
Representative
6. Five copies of the evidence
302
COOPERATION AGREEMENT (EXCERPT)
Party A: Guangzhou Sea & Skytech Co., Ltd.
Party B: US Hongtu International Investment Inc.
(1) Clause 5.3 of the Cooperation Agreement stipulates that: “The capital
subscription and cooperation conditions for Party A are as follows: (a)
Party A shall contribute as registered capital the assets listed in Appendix
2 hereto and the intellectual property listed in Appendix 3 hereto, with its
contribution accounting for thirty-three point three percent (33.3%) of the
total registered capital. Both parties hereto agree that the assets listed in
Appendix 2 shall be no less than two million (2,000,000.00) Chinese
RMB. Where said assets are verified to be less than two million
(2,000,000.00) Chinese RMB, the proportion of shares held by both
parties shall be adjusted accordingly. Both parties hereto agree that for the
purposes of cooperation, Party A shall contribute to the Company all
intellectual property, goodwill, customer lists, name of company, and
materials concerning business operations, which are all listed in Appendix
3; that Party A shall ensure that the persons listed in Appendix 1 sign a
three-year employment agreement as principal staff with the Company,
and that said persons shall fully perform all warranties, representations,
and obligations as set forth in such employment agreement.”
303
(2) Clause 5.5(a) of the Cooperation Agreement stipulates that: Party A
(namely, the Respondent) shall fulfill any and all cooperation conditions
under Clause 5.3 hereto for the benefit of the Company within one month
upon issuing of the business license, including but not limited to
transferring any and all customer lists and materials concerning business
operations to the Company, completing all formalities of intellectual
property changes as required by the law (including but not limited to
transferring to the Company the assets listed in Appendix 2 hereto and the
intellectual property, goodwill, customer lists, name of company, etc. all
listed in Appendix 3 hereto…”
(3) Clause 9.1 of the Cooperation Agreement stipulates that: “Neither
Party A nor any of its shareholders, employees, or related companies in
the past, at present or in the future shall establish (a) any joint venture
company or companies with other individuals or entities within the
territory of China or engage in similar arrangement, or engage in any
activities or take any actions that are and/or will be in competition with
any current and future business operations of the Company (namely, the
Joint Venture Company).”
(4) Clause 9.1 of the Cooperation Agreement stipulates that:
304
“Non-compete (a) No senior employee shall, within the territory of China,
provide services or make profits by any means for other individuals,
companies, institutions, entities or organizations or participate in any
activities arranged by such individuals, companies, institutions, entities or
organizations that directly or indirectly impair the interests or compete
with the business operations of the Company.”
(5) Clause 12.2 of the Cooperation Agreement stipulates that: “The
Company shall, in accordance with the principles set forth herein, include
a non-compete clause in the employment agreement with its employees,
providing that no employee who engages in software development or
marketing or has access to the technology and business secrets of the
Company shall be employed by or provide services to any companies,
entities, institutions, or organizations which produce and develop similar
products or conduct similar business operations and thus directly or
indirectly compete with the Company, or develop and produce of his or
her or its own accord similar products which directly or indirectly conflict
or compete with those of the Company.”
(6) Clause 12.3 of the Cooperation Agreement stipulates that: “The
copyright of any software or other software products that any employees
develop in the course of work done for the Company shall belong to the
305
Company. No employee shall appropriate any such rights and interests by
any means upon or after termination of the employment agreement with
the Company.”
(7) Clause 19.1 of the Cooperation Agreement stipulates that: “The
breaching party shall be liable for compensation to the other party for any
and all actual losses and such losses as are foreseeable upon execution of
this Agreement arising from the breach of agreement, including but not
limited to lost profits, interest and auditing, accounting and attorney fees
that are paid or lost arising from the breach of agreement.”
(8) Clause 23.2 of the Cooperation Agreement stipulates that: “Any
dispute arising out of or relating to this Agreement shall be submitted to
the Beijing-based China International Economic and Trade Arbitration
Commission (hereinafter referred to as ‘Arbitration Commission’) for
arbitration. Such arbitration shall be conducted in accordance with the
then prevailing arbitration rules of the Arbitration Commission. The
arbitration award shall be final and binding on both Parties hereto, who
are committed to performing such award. Any court with jurisdiction may
execute such award. All arbitration costs including those arising from the
execution of the arbitration award shall be borne by the losing party.”
306
(9) Appendix 1 to the Cooperation Agreement stipulates that: “The
persons specified above shall enter into an employment agreement with
the Company and undertake as follows: no person shall unilaterally
terminate the employment relations with the Company within three years;
no person shall engage in any work that competes with the business
operations of the Company within one after the termination of his or her
agreementual relations with the Company; no person shall be employed
by or provide services to any entities or individuals that directly or
indirectly compete with the Company. Where any of the persons specified
above breaches this clause, which leads to a material breach of Party A
under this Agreement, any and all losses incurred by Party B shall be
borne by Party A in accordance with Clause 19 herein.”
307
Appendix 1 List of Principal Staff
Title
Name
Gender Age
Annual
Specialty/
Salary
Academic
Degree
General
XIN Xiaogang
Male
WANG Hong
Male
Manager
General
Engineer
Senior
MA Zhongwei Male
Management （
Staff
Deputy
General
Manager）
WANG
（
Ming Male
Deputy
General
Manager）
LIU
Male
Chongsong
(Manager
of
Management
Dept.)
308
MA
Biao Male
(Manager of
Accounting
Dept.)
The persons specified above shall enter into an employment
agreement with the Company and undertake as follows: no person shall
unilaterally terminate the employment relations with the Company within
three years; no person shall engage in any work that competes with the
business operations of the Company within one year after the termination
of his or her agreementual relations with the Company; no person shall be
employed by or provide services to any entities or individuals that
directly or indirectly compete with the Company. Where any of the
persons specified above breaches this clause, which leads to a material
breach of Party A under this Agreement, any and all losses incurred by
Party B shall be borne by Party A as per Clause 19 herein.
309
Appendix 2 Asset List
The assets contributed by Party A include:
Cash: seven hundred and eighty-eight thousand seven hundred and
seventy-four point five eight (788,774.58) Chinese RMB
Amount Payable: nine hundred and eighty-five thousand nine hundred
and eleven point four two (985,911.42) Chinese RMB
Fixed Assets: worth two hundred and twenty-five thousand three hundred
and fourteen point zero zero (225,314.00) Chinese RMB
The fixed asset list and price estimation of each item are subject to further
verification and confirmation of both parties hereto.
310
Appendix 3 Specific Conditions for Cooperation
(1) Software Products
MIS: data management software
(2) Goodwill
(3) Customer Lists
The Public Security Bureau of Wenshui, Guangdong
Guangdong Patrol
Northern Airlines of Guangdong
Hehai University of Guangdong
111 Research Institute under the State Ministry of Security
(4) Name of Company
“海天” (Chinese characters) and “Sea & Skytech”
(5) Materials Concerning Business Operations
Party A shall transfer the intangible assets specified above to the Joint
Venture Company within one month after the establishment of the
Company.
311
Party A: Guangzhou Sea & Skytech Co., Ltd. (Stamp)
Legal Representative: WU Tianzhong (Signature)
Party B: US Hongtu International Investment Inc. (Stamp)
Legal Representative: MA Ketong (Signature)
This Agreement is executed in Beijing on this thirty-first day of January
two thousand (2000)
312
INDUSTRIAL & COMMERCIAL REGISTRATION OF
JOINT VENTURE COMPANY
No. 860712
Enterprise Name (Chinese): 广州东华海天技术有限公司 (Chinese
Characters;
Translation: Guangzhou Donghua Sea &
Skytech Co.,
Ltd.)
(Foreign Language):
Domicile:
Type of Corporation: Cooperative joint venture (US-funded)
Business Scope: developing and producing computer hardware and
software, system integration products, and comprehensive after-sale
services; selling self-produced products
Registered Capital: Six million (6,000,000.00) Chinese RMB (Paid-up
Capital: zero million (0,000,000.00) Chinese RMB
Board Chairman: FENG Jianghong
Vice Board Chairman: WANG Xinmei
General Manager: XIN Xiaogang
Deputy General Manager: WANG Wanghong, MA Zhongwei, WANG
313
Ming
Branches and/or Subsidiaries
Business Operation Term: from March 10. 2000 to March 9, 2015
Validity Term of Original License: from March 10. 2000 to March 9,
2001
For and on Behalf of State Industrial and Commercial
Administration of
People’s Republic of China
_____________________________
Chairman (Signature and/or Stamp)
Date: This tenth day of March two thousand (2000)
The term of validity of this duplicate expires on the tenth day of March
two thousand and one (2001)
314
BUSINESS OPERATION LICENSE OF
Explanations
BUSINESS CORPORATION
1. The Business Operation License of Business Corporation is the
(Duplicate)
certificate for an enterprise to obtain its legal person qualification
and legal operation.
Duplicate No.: 5201910002003070200000
Registration No.: 5201912300403
2. The Business Operation License of Business Corporation is
issued in an original copy and a duplicate copy, with both copies
having the same legal force. The original copy of the business
Name of Corporation: Guangzhou Sea & Skytech
operation license shall be placed at an eye-catching position in
Software Co., Ltd.
the registered domicile. The Corporate body may apply with the
Domicile: Rm 160, Bldg 3, Software Venture Center,
registrar for duplicates where necessary.
Software Park, New and High-Tech Development 3. The Business Operation License of Business Corporation shall
Zone, Guangzhou
not be fabricated, altered, leased, lent or transferred. No other
Legal Representative: WANG Xinmei
body or individual than the registrar shall be allowed to detain,
315
Registered Capital: two million (2,000,000) Chinese
RMB
4. The business corporation shall confine its business operations to
Type of Corporation: Limited liability company
Scope
seize or revoke it.
of
Business:
Development,
the approved and registered scope.
sale
and 5. The alternation registration shall be applied with the original
technology services of computer software and
registrar for a change of the registered items.
intelligence systems; sale, technology services, 6. Annual inspection of the business corporation is conducted by the
computer system integration, and net wiring of
registrar between January 1 and April 30 each year.
computers and computer parts and accessories; sale 7. Both the original and duplicate copies of the business license
of
communications
products
(excluding
ground
satellite receiving facilities), electronic products,
shall be returned for cancellation. The business license is
automatically invalid upon revoke by the registrar.
stationery and facilities for cultural and office use,
Statement of Annual Inspection
industrial automation devices, and mechatronic
devices;
development
and
promotion
of
316
bioengineering; economic management consulting Registrar: Signature and/or Stamp (Industrial and Commercial
and image design for enterprises; technology training Administration of Guangzhou)
and consulting services.
This
thousand and three (2003)
Business Operation Term: from July 2, 2003 to July
1, 2013
Date of Establishment: July 2, 2003
317
second
day
of
July
two
ARBITRATION AWARD NO. 0029 (EXCERPT)
…
Paragraph 2 on Page 20:
This Tribunal notes that Clause 9.1 of the relevant Agreement specifies
that … It can be concluded that Clause 9.1 of the Agreement is rather
general in specifying the non-compete scope against the Respondent,
including “establish a joint venture company or companies or engage in
similar arrangement, or engage in any activities or take any actions that
are and/or will be in competition with any current and future business
operations of the Company.” Then the question of what “any current and
future business operations” of the Joint Venture Company refers to is
crucial to the issue whether the Respondent has breached this clause.
Clause 4.2 of the relevant Agreement specified that the business scope of
the Joint Venture Company includes …; and the business license … In
accordance with these provisions, this Tribunal decides that the business
scope of the Joint Venture Company includes development, production,
sale and after-sale services of computer software and hardware and
system integration products. Under Clause 9.1 of the Agreement, the
Respondent shall not compete with the Joint Venture Company within
this scope.
318
This Tribunal also notes that the business scope specified in the business
license issued to the Respondent by the Industrial and Commercial
Administration of Guangzhou on August 7, 2003 includes …, which
means that prior to the conclusion of the relevant agreement with the
Claimant, the Respondent had already engaged in such business
operations as sale, reparation and maintenance of computer hardware, and
development and sale of computer software which overlap with those of
the Joint Venture Company. The business scope of the Respondent
remained unchanged after the execution of the Agreement, including the
business operations which overlap with those of the Joint Venture
Company as before. In accordance with the “List of the Third Batch of
Approved Registered Software Products of Guangdong” which was
publicized on the website of the Department of Information Industry of
Guangdong, the Respondent reported YUYU software products for
examination and obtained approval for them in 2002 and for WW in 2003.
Furthermore on July 2, 2003, the Respondent established Guangzhou Sea
& Skytech Software Co., Ltd. whose business scope includes … The
Respondent has never denied its continuing engagement in development,
production and sale of computer software and hardware and
establishment of said software company after establishment of the Joint
Venture Company, but claims that it is not a direct competitor of the Joint
319
Venture Company in this regard. This Tribunal decides that the
“non-compete clause” in the relevant agreement, to wit Clause 9.1, is an
agreement based on consultation by both parties thereto and is thus legal,
valid, and binding on both parties. The Respondent, as a company whose
business scope includes development and sale of computer software and
hardware, cooperated with the Claimant to establish a joint venture
company; and it undertakes that it will not “compete in any current and
future business operations” with the Joint Venture Company. Therefore,
after the establishment of the Joint Venture Company, the Respondent
should have performed its obligations specified in the Agreement
immediately and refrained from engaging in such activities as
development, production, sale and after-sale services of computer
software and hardware and system integration products which all overlap
with the business scope of the Joint Venture Company; it should never
have established Guangzhou Sea & Skytech Software Co., Ltd. whose
business scope overlaps with that of the Joint Venture Company. In
consideration of the above reasons, this Board decides that the acts of the
Respondent specified above have breached the terms of Clause 9.1 of the
relevant agreement.
This Tribunal contends that in accordance with the Contract Law of the
People’s Republic of China …, the Respondent failed to perform the
320
non-compete obligations under Clause 9.1 of the Agreement and shall be
liable for breach accordingly. This Tribunal accordingly decides that the
Respondent shall continue to perform its non-compete obligations and
refrain from engaging in any activities that “compete with any current
and future business operations” of the Joint Venture Company.
This Tribunal also finds that it is for the purposes of protecting the rights
and interests of the Joint Venture Company that Clause 9.1 of the relevant
agreement specifies that the Respondent undertakes that it will not
“compete in any current and future business operations” with the Joint
Venture Company. In accordance with the Contract Law of the People’s
Republic of China …, the Respondent shall indemnify the Joint Venture
Company rather than the Claimant for its breach of said clause. The
Claimant also admits that the direct beneficiary of this clause is the Joint
Venture Company but claims that it is an indirect beneficiary and is
entitled to distribution profits from the Joint Venture Company payable to
it under the relevant terms of the Agreement and the Articles of
Association of the Joint Venture Company. This Tribunal decides that the
Respondent shall indemnify the Joint Venture Company for the profits
obtained form the corresponding business operations which are in parallel
competition with the Joint Venture Company after the execution of the
relevant agreement. In accordance with the Law on Sino-Foreign
321
Cooperative Joint Venture Enterprises of the People’s Republic of
China …, the Claimant in this case has not applied for termination of the
Agreement, and both parties thereto have never commenced consultation
on termination of the Joint Venture Company. Moreover, upon
termination of the Joint Venture Company, the cooperative parties shall
not dispose of the property in the name of the Joint Venture Company
until the credits and debts are settled.
Last paragraph on Page 24
This Tribunal decides that the Respondent has breached the terms of the
“non-compete clause” in the relevant agreement and shall cease its
breaching conduct and refrain from engaging in business operations
which “compete with any current and future business operations” of the
Joint Venture Company, namely, refrain from engaging in such activities
as development, production, sale and after-sale services of computer
software and hardware and system integration products which overlap
with the business scope of the Joint Venture Company;
322
ARBITRATION AWARD NO. 0170 (EXCERPT)
I. Fact Summary
(Omitted)
II. Decision
This Tribunal decides that it is an undisputable fact that the Joint Venture
Company runs at a heavy loss, and accordingly the objective conditions
for continuing business operations are lacking; even if it continues its
business operations, the goals of the cooperative joint venture would be
difficult to achieve. Furthermore, the cooperative parties have
subjectively developed rancor against each other, and the conflicts
between the two can hardly be settled, so the common ground for
cooperation does not exist anymore. Therefore, given that the
agreementual and statutory conditions have been fulfilled, the Joint
Venture Company should be dissolved. However, the reasons for losses of
the Joint Venture Company and the persons to be blamed are not the
statutory preconditions for dissolving the Joint Venture Company.
III. Award
323
This Tribunal hereby enters into the award as follows:
1. The Cooperation Agreement entered into by and between the
Claimant and the Respondent shall be terminated; the Joint Venture
Company shall be dissolved;
2. The costs of arbitration shall be borne by the Respondent.
Chief
Arbitrator
(Signature
and/or
Stamp)
Arbitrator (Signature and/or Stamp)
Arbitrator (Signature and/or Stamp)
This twenty-ninth day of April two thousand and five
(2005) in Beijing
324
APPLICATION FOR INQUIRY CONCERNING
COMPUTER SOFTWARE COPYRIGHT
Inquiry by Company Inquiry by Individual
Application Date:
September 22, 2006
：
This
Name
Column
Kaiyun
should
Company for contact:
be
US Hongtu International Investment
LU Type
of Certificate No.
Certificate: ID
Post Code:
completed Inc.
by
520502197403282019
Post Add.:
Applicant. 3 Happy Ave, Seattle, US
Tel. (Area Code)
001-200-706-9444
Purposes of Inquiry:
To collect evidence for arbitration
and litigation
325
Content of Inquiry（Please specify the registration number,
name, and any known or copied information of the
software.）
To inquire about the company with the name Guangzhou Sea
& Skytech and the name and registration number of the
software registered by such company.
Between September 1, 2001 and August 31, 2006 (Time
Range of Inquiry)
This
Mode of Inquiry: Paper capacitor, Cost：50 Chinese RMB
Column
computer search, optical disk search
should
Duration of Inquiry: 60 min.
be
Signature
and/or
Stamp
of
completed Examiner: WU Yue
by
September 22, 2006
Examiner. Explanations of Inquiry Results:
Photocopying,
printing
inquiry for reference
326
machine,
Upon computer search, 37 entries of copyright owner
with the name “Guangzhou Sea & Skytech” are found in the
registration database for computer software copyright dated
between September 1, 2001 and September 22, 2006 in this
Center.
327
APPLICATION FOR INQUIRY CONCERNING
COMPUTER SOFTWARE COPYRIGHT
Inquiry by Company Inquiry by Individual
Application Date:
September 22, 2006
：
This
Name
Column
Kaiyun
should
Company for contact:
be
Guangzhou
LU Type
of Certificate No.
Certificate: ID
520502197403282019
Post Code:
Donghua
Sea
&
completed Skytech Co., Ltd.
by
Post Add.:
Applicant. Rm 505, New Century Building,
Hunan Rd, Guangzhou
Tel. (Area Code)
020—72249595
Purposes of Inquiry:
To find the status of software
copyright of the company
328
Content of Inquiry（Please specify the registration number,
name, and any known or copied information of the
software.）
To obtain information concerning Guangzhou Donghua Sea
& Skytech Co., Ltd. as copyright owner
Between 2000 and 2006 (Time Range of Inquiry)
This
Mode of Inquiry: Paper capacitor, Cost ： 125 Chinese
Column
computer search, optical disk search RMB
should
Duration of Inquiry: 60 min.
be
Signature
and/or
Stamp
of
completed Examiner: WU Yue
by
September 8, 2006
Examiner. Explanations of Inquiry Results:
Photocopying,
printing
inquiry
329
machine,
Upon computer search, no entry of copyright registration
by “Guangzhou Donghua Sea & Skytech” is found in the
registration database for computer software copyright dated
between January 1, 2000 and September 22, 2006 in this
Center.
PROSPECTUS (EXCERPT)
Important Information
The following is merely an excerpt from the whole document, and the
reader should also refer to the original when reading this document. The
Investor should read the whole document instead of solely relying on the
following information and should pay special attention to Part II herein
titled “Risk Factors”.
Introduction
The Group is dedicated to developing and selling software products and
providing software-related services and system integration to meet the
special needs of China and of governmental agencies across the country.
330
The Group provides the following products to governmental agencies,
institutions, and export enterprises in Guangdong, China.
Export-tax software which, as a combination of a front-end product series
used by taxation bureaus and a back-end product series used by export
enterprises, helps generate and file documents concerning export taxes.
z
E-government software which helps governmental agencies
automatically establish a virtual and real-time system at the municipal
and provincial levels to facilitate citizens’ access to some
governmental services;
z
Information integration software which provides existing customers
with a large amount of information and ensures the delivery,
integration and synchronization of information in a complex,
multi-platform, and multi-user computer environment;
z
Individualized services for existing customers, including software
updating, system integration, training, customer support, problem
solution, and error repair.
Part I Group Profile
1. Introduction
331
The Group is dedicated to developing and selling software products and
providing software-related services and system integration which are
tailored to the special needs of certain local and state governmental
agencies in China.
Ginosoft Technology Plc is a UK-based holding company of Imfotech,
which in turn is a Singapore-based holding company of two subsidiaries,
namely, Guangzhou Sea & Skytech and Guangzhou Software. These two
subsidiaries were both registered and have operated in Guangdong,
mainly providing certain governmental agencies, institutions and export
enterprises in Guangdong and Hainan with the following products and
services:
?
Export-tax software which can complete and computerize
export-tax files, including a set of logistic products for tax
administration and a set of front-end products for export
enterprises;
?
Software which can automate programs of governmental agencies
at the municipal and provincial levels to create a virtual but
real-time environment for citizens to access certain governmental
services;
?
System integration software which is designed to provide existing
332
customers with an opportunity to manage a large amount of
information and assist them to ensure the distribution,
combination and synchronization of such information in a
complex, multi-platform, and multi-seller information technology
environment; and
?
Services tailored to existing customers, including software
updating, system integration, training, customer support, problem
solution, and program error repair.
4. Products & Services
Sea & Skytech software products are targeted at three areas: (i) export
taxes; (ii) e-government; and (iii) information and system integration.
10. Intellectual Property Rights
The intellectual property rights of the Group are under the protection of
The Intellectual Property Law of China. The owner is entitled to publish,
develop and use such property (including duplication, amendment and
translation), to license others to use the property for profit, and to assign
it.
The Group protects the intellectual property rights of its export-tax
333
software by using the “activation number” system. Each item of
export-tax software is given a unique registration number which matches
the one given to customers at the time of purchase.
The Group further protects the intellectual property rights of its software
by using USB security tokens.
11. Corporate Structure
The corporate structure of the Group is outlined below:
Guangzhou Sea & Skytech and Guangzhou Software were established in
December 1998 and July 2003 respectively. The two companies are both
owned by Imfotech and carry out joint business operations. Imfotech was
established in October 2004 in Singapore and acquired Sea & Skytech in
2005. Ginosoft was established in December 2005 in the UK and
acquired Imfotech by the share-swap method in January 2006 as part of
its preparation for listing.
In October 2003, Guangzhou Software acquired 5% of Guangdong CA,
which was then a joint venture specializing in electronic identity
certificates.
334
PAST FINANCIAL INFORMATION ABOUT SEA & SKYTECH
(Guangzhou Sea & Skytech Co., Ltd. and Guangzhou Sea & Skytech Software
Guangzhou Sea & Skytech Co., Ltd. & US Hongtu International Investment Inc.
Consolidated Profit & Loss Account
Nine-month Nine-month Fiscal year Fiscal
period
period
ending
ending
ending
Dec.
Remarks
year
31, ending
Sep.
30, Sep.
2005
2004
(audited)
(audited)
Turnover
4,271,108
3,159,607
Sales Costs
(1,159,417) (1,112,386) (1,458,877) (427,392) 1) (1,159,417)
30, 2004
(audited)
Dec.
31,
2003
(audited)
4,979,029
1,714,397 2
335
4,271,108
USD
USD
USD
Gross Profits
3,111,691
2,049,221
3,520,152
1,287,005 1
3,111,691
Other Income
443,119
262,098
458,692
195,286
443,119
R&D Costs
(289,414)
(404,119)
(483,460)
(409,288) )
& (290,677)
(217,344)
(315,378)
(299,682) 8) (290,677)
(452,444)
(375,120)
(434,866)
(467,891) 8) (452,444)
Sales
4
(289,414)
Distribution
Costs
Admin. Fees
336
Others
(136)
(200)
(3,226)
(8,897)
8) (136)
2,522,139
1,312,536
2,741,914
296,533
2
2,522,139
(16,241)
(13,388)
(18,981)
(5,949)
–
(16,241)
17,898
8,345
10,687
4,064
Expenditure
Operation
Profits
Accounting
Fees
Financial
Income
337
17,898
Losses
–
(10,431)
(80,929)
(61,728)
)
–
–
104,384
–
–
–
(12,107)
(88,116)
98,780
1
–
attributable to
Affiliate
Company
Profits
from –
sale
of
Subsidiaries
Investment
–
338
(Losses)
/
Profits
Pre-tax Profits 2,523,796
1,284,955
2,668,959
331,700
0
2,523,796
Income Tax
–
–
(4,477)
–
–
–
Net Profits
2,523,796
1,284,955
2,664,482
331,700
0
2,523,796
Minority
–
(32,049)
(32,049)
(27,911)
–
–
2,523,796
1,252,906
2,632,433
303,789
0
2,523,796
Interests
Shareholders’
339
Net Profits
340
NOTES ON FINANCIAL STATEMENTS
1. Company and Its Operations / General Data
?
Guangzhou Sea & Skytech Co., Ltd. was duly registered on
December 14, 1998 in the People’s Republic of China (“China”),
specializing in developing and selling computer software,
computers and peripheral devices, accessories relating to
communications products, electronic products, and other electric
apparatuses.
?
Guangzhou Sea & Skytech Co., Ltd. became a subsidiary of
Imfotech Holdings Pte on July 31, 2004; and the latter became a
wholly-owned subsidiary of Ginosoft Technology Plc on January
20, 2006.
?
Guangzhou Sea & Skytech Software Co., Ltd. was established in
the People’s Republic of China on July 2, 2004, specializing in
development, sale, services of computer software and science
and technology.
?
Prior to July 31, 2004, Guangzhou Sea & Skytech Software Co.,
Ltd. had been a subsidiary of Guangzhou Sea & Skytech Co., Ltd.
which held 92% shares of the former. On July 31, 2004,
Guangzhou Sea & Skytech Co., Ltd. was acquired by Guangzhou
Sky Investment Information Co., Ltd. In January 2005, 100% of
issued stock capital of Guangzhou Sea & Skytech Software Co.,
Ltd. was acquired by Imfotech Holdings Pte. Ltd.
?
The registered address of Guangzhou Sea & Skytech Co., Ltd.
and Guangzhou Sea & Skytech Software Co., Ltd. is 3/F, 50
Building in the Guangdong Software Park, 168 Longpan Rd (M),
Guangzhou, People’s Republic of China.
341
2. Standards for Financial Information Compilation
?
The financial information herein was compiled by the directors
of Ginosoft Technology Plc under the International Financial
Reporting Standards (“IFRS”).
?
The financial information herein includes that of Guangzhou Sea
& Skytech Co., Ltd. and Guangzhou Sea & Skytech Software
Co., Ltd. (merged entity), which were both wholly-owned
subsidiaries of Imfotech Holdings Ptc on September 30, 2005.
During the period when Guangzhou Sea & Skytech Co., Ltd.
held 90% of the shares of Guangzhou Sea & Skytech Software
Co. Ltd., the accounts were included in the consolidated accounts
under the Group.
?
Afterwards, the accounts of these two subsidiaries were
combined but not consolidated. All information relating to
transactions and balances between the said subsidiaries was
deleted at the time of compiling the financial information of the
merged entity. Said financial information does not consolidate
the business performance of the two companies or reflect the
legal ownership and structure of Imfotech (Group) in the time
frame specified in said financial information.
?
The accounts of the merged entity are stated in RMB. Its
financial statements are compiled under the accounting principles
generally accepted in the People’s Republic of China. The
financial information herein is compiled based on the legal
records, including the date of adjustment and reclassification for
the purposes of meeting the requirements of IFRS and making a
truthful representation of the company.
?
The financial information herein is compiled in accordance with
cost practices, excluding the information relating to the following
342
accounting principles.
?
The financial information herein has been prepared as
preparation of Ginosoft Technology Plc for listing.
?
The financial information herein should not be deemed to be
legal accounts. It includes comparative data before audit up to
September 30, 2004.
343
2. Investment
Period
Period Period ending Period ending
ending Sep.
Dec. 31,
Dec. 31, ending Dec.
31, 2002
30, 2005
2004
2003
Audited
Audited
Audited
Audited
USD
USD
USD
USD
Affiliated
Company：
Investment
Portion of Results
after Acquisition
Loss Provision
Investment Costs in
Other Share Capital
242,131
(161,202)
242,131
(161,202)
242,131
(161,202)
242,131
(99,474)
(80,929)
-181,598
181,598
(80,929)
-181,598
181,598
-80929
181,598
262,527
-142,657
-142,657
The following are details of the Affiliated Company:
Name:
Guangzhou
Donghua
Consultants Co.,
Ltd.
Principal Business Actual shares
Registration /
Operations
Developing and selling
held by
People’s
hardware and software
Group
Republic of
and system integration
33%
China
services
The Affiliated Company went into liquidation in 2005, and loss provision
has been included in the investment by the Group.
344
The following is a summary of the financial information of the merged affiliated company.
Period ending Sep. 30 Period ending Dec. 31Period ending Dec. 31
2005
2004
2003
02
Audited
Audited
Audited
USD
USD
USD
Total Assets
–
404,244
778,867
22
Total Debt
–
248+974
636,080
62
Net Assets
–
155,270
242,767
70
Net Assets of Affiliated Company
–
51,757
80,929
57
Income
–
461,733
626,418
98
Losses within Time Frame
–
(87,516)
(185,184)
58)
Allocation of Losses within
–
–
(61,728)
86)
Allocation after Merger
Time Frame to Affiliated Company
345
21. Share Capital
Period ending Sep. 30 Period ending Dec. 31Period ending Dec. 31
2005
2004
2003
02
Audited
Audited
Audited
USD
USD
USD
Guangzhou Sea & Skytech Co., Ltd. 1,210,654 1,210,654
1,210,654
27
Registered Capital：
Guangzhou Sea & Skytech
Software Co., Ltd.
242,131
242,131
-
-
1,452,785
1,452,785
1,210,654
27
Increases of registered share capital of Guangzhou Sea & Skytech Co., Ltd
- Investment of 242,131 USD on November 8, 2002;
- Investment of 606,327 USD on August 2, 2003;
The registered capital of Guangzhou Sea & Skytech Software Co., Ltd since its establishment has been two hundred and
forty-two thousand one hundred and thirty-one (242,131) USD
346
PART VI
11. Litigation
(a) Donghua Technology Co., Ltd ('Donghua”) was registered as a joint
venture company in 2000 under the Cooperative Joint Venture Agreement
(“CJVA”) entered into between Guangzhou Sea & Skytech and Hongtu
Co., Ltd. ("Hongtu "). Hongtu once filed a claim against Guangzhou Sea
& Skytech. In February 2005, the arbitration tribunal found that
Guangzhou Sea & Skytech breached the “non-compete clause” under the
CJVA in its software development operations. However in April 2005,
given the actions of Guangzhou Sea & Skytech, the court ordered that the
Joint Venture Company with Donghua be liquidated. The directors
maintain that even if any party were to file a claim against Guangzhou
Sea & Skytech for the profits from the software development operations
during the period in dispute, such a claim would be small in amount. In
other words, Guangzhou Sea & Skytech will resist relevant claims after
seeking legal advice.
(b) According to the above disclosure, no company under the Group has
been involved in or aware of any pending governmental, legal or arbitral
actions or threats that will exert a material impact on its financial status or
profit-making capability in the following twelve months.
347
EXPLANATION OF PROSPECTUS BY UK ACCOUNTING FIRM
To: The Directors
Ginosoft Technology Plc
3 Hyde Park Row, Leeds LS1
February 2, 2007
Dear Madam：
Ginosoft Technology Plc
As you know, we act as the reporting accountant for your company in
relation to its listing on the London Stock Exchange AIM.
You requested us to give an explanation of the income which is disclosed
on Page 56 in the Prospectus for your company’s listing on the London
Stock Exchange AIM (“Prospectus”).
We are ready to confirm that the income disclosed on Page 56 in the
Prospectus is from two independent companies, namely, Guangzhou Sea
& Skytech Co., Ltd. and Guangzhou Sea & Skytech Software Co., Ltd.,
and such disclosure is compiled under the International Financial
Reporting Standards (IFRS).
Please note that as to the combined income of the two companies or that
of either company, there may be a difference between the figure in the
financial statement compiled under the IFRS and that under the Chinese
accounting standards.
348
We suggest that you may rely on the financial statement issued by the
Chinese accounting firm under the Chinese accounting standards.
Do not hesitate to let us know if you need further help.
Yours Sincerely,
Mark Hamilton
349
DEFINITION OF MANAGEMENT INFORMATION SYSTEM
October 25, 2007
To Hongtu International Investment Inc.
At your request, we define the term “management information system” as
follows on the next page. Generally speaking, a management information
system is a software system which provides information for organization
and management. Recent years have witnessed its application to a wider
scope, including software systems which can provide information for
management, people who support management, and related services and
formalities.
Best regards!
Yours Sincerely,
WU Quanneng
(Signature and/or Stamp)
PhD in Computer Science
Associate professor with Department of Electronic Computing, Tsinghua
University
Director of Laboratory of Software Development and Management,
Tsinghua University
Part-time professor with Department of Electronic Computing, University
of Hong Kong
350
Commonly Accepted Definition of MIS
MIS (Management Information System) is a computer-based system that
provides information to facilitate organization and management and is
able to support all kinds of management activities. Some examples of
MIS include accounting management information systems, financial
marketing management systems, manufacturing management information
systems, marketing management information systems, human resources
management information systems, project management systems, tax
management systems, information integration systems, decision support
systems, and expert systems. Those functions of e-government systems
which are related to management activities can also be considered as part
of MIS.
MIS should include software that helps in decision making, a database,
and corresponding hardware resources.
Recent years have witnessed the application of MIS to a wider scope.
Expanded Definition of MIS
MIS includes software systems which can provide information to
facilitate management, people who support management, and related
services and formalities.
351
CURRICULA FOR VOCATIONAL COLLEGES AND
PRACTICE-BASED TEXTBOOK SERIES IN NEW CENTURY
---MANAGEMENT INFORMATION SYSTEMS (MIS)
Management Information System (MIS)
Editors in Chief: XIE Shengqing & LIU Yonghua
Associate Editors: XU Xiuqing & WANG Zhaohong
Tsinghua University Press
Beijing
352
Classification of MIS
1. Classification Based on Management Hierarchy
Based on the management hierarchy, information systems may be
classified into strategy-making systems, management systems, knowledge
systems and operating systems (implementation systems), etc.
1) Transaction Processing Systems at Operational Level
A Transaction Processing System (TPS), also named Electronic Data
Processing System (EDPS), is targeted at the bottom-level management
of enterprises and process transaction information relating to the regular
operations of enterprises. It is the fundamental form of an information
system, featuring highly-structured problem solutions, uniformity of
functions, and limited scope of design. Ticket-booking systems,
accounting cost verification systems, inventory statistics systems and
salary payment systems are a few examples of such systems. It provides
real-time information relating to a business, namely, an immediate
reflection of business operations.
2) KWS & OAS at Knowledge Level
A Knowledge Working System (KWS) is a highly specialized information
system which assists professionals to develop new products for a business,
for instance, CAD workshop, investment systems, etc. It processes the
353
internal and external data of businesses by using expertise.
An OAS assists administrative staff of a business to manage information
flows. By applying advanced technology, it is a human-machine
information system which materializes part of office work into various
devices which, together with office staff, complete office work. Such
systems effectively process, transmit, and manage office information, for
example, word processing systems, video conference systems, electronic
mail systems, etc.
3) MIS at Management Level
MIS at Management Level is a product based on TPS. It is designed for
comprehensive and integrated management of various business activities.
In MIS, a centralized and unified database is indispensable. All
information is stored in such database, which ensures consistency of
shared information. MIS often analyzes data and assists decision making
by mathematical models, for example, decision-making models for
investment in resource consumption, models for production adjustment,
models for manufacturing resource planning MRP-II, etc.
4) DSS & ESS at Strategy-Making Level
A Decision Support System (DSS) is higher than MIS in the hierarchy. It
354
supports intermediate and senior management staff to make effective
decisions to solve specific problems. It solves semi-structuralized and
non-structuralized problems by means of updated technology including
databases, model bases, knowledge bases, etc. The best route for
transportation, the best order of size, and the best production adjustment
are some of such solutions.
An Executive Support System (ESS), equipped with computer and
correspondence capabilities, is specially designed for the top management
in a business. It assists the top management to solve non-structuralized
problems of strategic significance arising from ever-changing
circumstances on a macro scale. Such strategic decisions may include
whether a new production line should be introduced; whether a certain
market should be explored; whether advertising should be intensified;
whether a cooperative or associate relationship should be established with
another business.
(Source: XIE Shengqing & LIU Yonghua, May 2006, Management
Information System.
Beijing: Tsinghua University Press. P17)
355
EXPLANATION OF MIS
BY GUANGZHOU SEA & SKYTECH SOFTWARE CO LTD
March 11, 2006
MIS in question refers to the software for management information
systems. Designed to apply database technology to MIS 2.0 for Hotel
Industry Security, it is a “hotel version” used by hotels.
The software products which Guangzhou Sea & Skytech Co., Ltd. should
provide to the Cooperative Company as covered by the terms of the
Cooperation Agreement are undoubtedly the MIS and management
database software which have already been developed and applied to
products at the time of the execution of Cooperation Agreement, rather
than those which are being or will be developed and applied to products.
MIS 2.0 for Hotel Industry Security is the only software product that
Guangzhou Sea & Skytech Co., Ltd. should provide as covered by the
terms of the Cooperation Agreement. The “hotel version” of such
software used by hotels refers to MIS which is covered by the terms of
the Cooperation Agreement; while the software used by the public
356
security department part of the management database.
The above explanation is made by XI Baiqiang, general engineer with
Guangzhou Sea & Skytech Co., Ltd.
357
INTERVIEW TRANSCRIPT
Date: August 2, 2008
Place: Shangjia International, 11 Jiefang Rd, Beijing
Interviewers: KOU Hua & ZHANG Li, lawyers with Huakai Law Firm
Interviewee: MA Bing, former supervisor of Chinese legal affairs with
the Department of Legal Affairs, US Hongtu International Investment
Inc.
Q: Nice to meet you, MA Bing. We are here to interview you regarding
the cooperative enterprise jointly set up by the US Hongtu International
Investment Inc. and Guangzhou Sea & Skytech Co., Ltd.
A: Ok.
Q: Could you tell us about your position and duties in the cooperative
enterprise?
A: In 2000, I was the General Manager with the Chinese Company (of
US Hongtu International Investment Inc.), in charge of acquisitions.
Introduced by others, I reached Guangzhou Sea & Skytech Co., Ltd. to
negotiate business operations, later execute the Agreement and start the
new business. I left the Cooperative Company last month and now work
with Shangjia Company.
Q: What caused you to seek cooperation with Guangzhou Sea & Skytech
Co., Ltd.?
358
A: I found the Chinese side got development projects from the
government and owned technology, but it got the idea of cooperation due
to insufficient capital. The two sides could establish a cooperative
company and develop software and computer hardware and software
products together.
Q: Was YUYU part of the cooperation covered by the terms of the
Cooperation Agreement?
A: Yes. YUYU system project which was developed by the company was
taken as a fundamental condition for both parties to execute the
Cooperation Agreement and establish the Cooperative Company. Without
this project, the foreign party would not have established any cooperative
company jointly with Guangzhou Sea & Skytech Co., Ltd.
Q: Do you know anything about the WW software product in dispute
between the Cooperative Company and the Chinese party?
A: Yes.
Q: Are YUYU which was then covered by the terms of the Cooperation
Agreement and WW in dispute now the same product?
A: Not exactly the same. WW is a new product updated on the basis of
YUYU.
Q: That’s all for today’s interview. Thank you for your cooperation.
Please read the transcript carefully and sign if there are no mistakes.
A: Ok.
359
I have read the above transcript, and it is consistent with what I said to the
best of my knowledge.
MA Bing (Signature)
August 2, 2008
KOU Hua (Signature)
ZHANG Li (Signature)
360
AUTHORIZATION LETTER
There is to certify that Ms. ZHANG Meili has duly obtained full
authorization from the Company to complete industrial and commercial
and tax registration for the cooperative enterprise jointly with Guangzhou
Sea & Skytech Co., Ltd., and execute the relevant documents in the
course of said registration on my behalf.
For and on behalf of
US Hongtu International Investment Inc.
Authorized Signature(s)
MA Ketong
This fifteenth day of February two thousand (2000)
361
REPORT ON FORENSIC IDENTIFICATION OF COMPUTER
SOFTWARE (EXCERPT)
Pingjianzi No. 22 of 2006
1. Applicant: US Hongtu International Investment Inc.
2. Date of Application: February 15, 2006
3. Application: To compare and identify the possible identity of the
source program of YUYU and that of WW.
4. Scope & Subject Matter of Identification: The scope and subject
matter of the present identification both refer to the source programs of
the two types of computer software: YUYU and WW upon application of
US Hongtu International Investment Inc.
5. Identification Method: (Omitted)
6. Identification Conclusion: Upon comparison with YUYU, it is
identified that WW only takes on a few new functions, for example, WW
enables the form for export tax rebate to be printed on a printed
362
declaration form (in blanks), while the original software YUYU can only
do this on a blank sheet. Such slight differences do not lead to
sustentative changes to the original software. Therefore, the new software
is identical in nature with the “software” transferred to the Cooperative
Company.
Moreover, according to the applicant, this software was developed on
March 30, 2004, while the third subject came into being on July 2, 2003,
which means that the size of its source program had reached 148,000
entries nine months before its development. Based on the consensus of
the industry, the size of a certain source program corresponds with a
certain level of development and certain human resources. Take X
software that the Chinese party has registered as an example, its size is
only 36,500 entries. The applicant specifies in its written statement that
the development of the software in question and the system testing and
trial running last one year respectively. The consensus of the industry
leads to the conclusion that the development, testing, trial running of
system software call for well-coded programs and sufficient time for
implementation. Such parameters for assessing the level of software
development are essential for examiners in their virtually
conventionalized work. It takes a newly established and
insufficiently-staffed software company no less than two years to develop
363
software whose size of source program is several times as 36,500 entries.
That is to say, the technical structure, overall design, core source program,
and relevant documents had already been completed before the
establishment of the third subject. The copyright of the software in
question came into initial existence in the Chinese company which is one
of the shareholders.
7. Special Notes
This identification was conducted for the purpose of providing a
universally acceptable reference for the value of involved assets in the
dispute concerning computer software copyright involving the applicant.
This Laboratory has not done any research on the objectivity and
feasibility of the whole report or any part thereof for other purposes than
the one above specified, and therefore assumes no liability for any
consequences thereof.
Issuing Date: February 15, 2006
Forensic Expert: (Signature)
Forensic Expert: (Signature)
Forensic Expert: (Signature)
Forensic Laboratory: Beijing Siyuan Laboratory for Forensic
Examination of Intellectual Property Rights
364
Note:
Identification of computer software products is conducted mainly by the
method of reverse engineering to identify the relevance, identity and
dissimilarity of software products as well as the core functions,
characteristic algorithms and proprietary technology. It usually takes
twenty to thirty days.
365
REPORT ON FORENSIC IDENTIFICATION OF COMPUTER
SOFTWARE (EXCERPT)
Pingjianzi No. 25 of 2006
1. Applicant: Guangzhou Sea & Skytech Co., Ltd.
2. Date of Application: February 28, 2006
3. Application: To compare and identify the possible identity of the
source program of YUYU and that of WW.
4. Scope & Subject Matter of Identification: The scope and subject
matter of the present identification both refer to the source programs of
the two types of computer software: YUYU and WW, upon application of
Guangzhou Sea & Skytech Co., Ltd.
5. Identification Method: (Omitted)
6. Identification Conclusion: Upon identification, we hold that WW has
added a number of new functions which lead to substantive changes to
the original software. Therefore, the new software WW is substantively
different in nature from YUYU.
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Moreover, the consensus of the industry is that the size of source program
should not be deemed as the only standard for the calculation of
development time of different types of software, and specific analysis
should be applied to the complexity of each type of individual software.
7. Special Notes
This identification was conducted for the purpose of providing a
universally acceptable reference for the value of involved assets in the
dispute concerning computer software copyright involving the applicant.
This Laboratory has not done any research on the objectivity and
feasibility of the whole report or any part thereof for other purposes than
the one above specified, and therefore assumes no liability for any
consequences thereof.
Issuing Date: February 28, 2006
Forensic Expert: (Signature)
Forensic Expert: (Signature)
Forensic Expert: (Signature)
Forensic Laboratory: Beijing Weilun Laboratory for Forensic
Examination of Intellectual Property Rights
Note:
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Identification of computer software products is conducted mainly by the
method of reverse engineering to identify the relevance, identity and
dissimilarity of software products as well as the core functions,
characteristic algorithms and proprietary technology. It usually takes
twenty to thirty days.
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DEPOSITION OF WITNESS
My name is WANG Zhou, male, thirty-eight years old. I am the manager
of the Department of Software Development of Guangzhou Yinghua
Software Company. Between October 2003 and December 2005, I
worked as the head of the Department of Software Development of
Guangzhou Sea & Skytech Software Co., Ltd. Shortly after I joined it, the
company entered into an agreement with the domestic taxation authorities
to jointly develop tax software. For the purposes of this project, the
company set up a research & development team. The company appointed
me to be the team leader and provided two million Chinese RMB as the
fund for research and development. Due to our efforts, we finally
developed the tax software WW and registered it. I cannot recall the exact
time of registration, but it was around 2004 and 2005. Anyway the
software had been registered before I left Guangzhou Sea & Skytech
Software Company.
WANG Zhou
August 2, 2006
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